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Free Agent Auctions and Revenue Sharing: A Simple Approach

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  • Rockerbie, Duane

Abstract

This paper uses a simple approach to address the issue of how revenue sharing in professional sports leagues can affect the allocation of free agent players to teams. To affect the allocation of free agents, the imposition of revenue sharing must alter the ranking of bidding teams in terms of maximum salary offers. Two types of revenue sharing systems are considered: traditional gate revenue sharing and pooled revenue sharing. The paper suggests that team rankings for ability to pay are not affected by pooled revenue sharing, however the distribution of player salaries will be compressed. Traditional gate revenue sharing can alter the ability to pay rankings for teams, depending upon playing schedules and the closeness of revenues between closely ranked teams.

Suggested Citation

  • Rockerbie, Duane, 2007. "Free Agent Auctions and Revenue Sharing: A Simple Approach," MPRA Paper 2218, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2218
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    File URL: https://mpra.ub.uni-muenchen.de/2218/1/MPRA_paper_2218.pdf
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    References listed on IDEAS

    as
    1. Phillip Miller, 2006. "Revenue Sharing in Sports Leagues: The Effects on Talent Distribution and Competitive Balance," Working Papers 0627, International Association of Sports Economists;North American Association of Sports Economists.
    2. Daniel R. Marburger, 1997. "Gate Revenue Sharing And Luxury Taxes In Professional Sports," Contemporary Economic Policy, Western Economic Association International, vol. 15(2), pages 114-123, April.
    3. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
    4. Rodney Fort & James Quirk, 1995. "Cross-subsidization, Incentives, and Outcomes in Professional Team Sports Leagues," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1265-1299, September.
    5. Stephen T. Easton & Duane W. Rockerbie, 2005. "Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model," Journal of Sports Economics, , vol. 6(4), pages 359-378, November.
    6. El-Hodiri, Mohamed & Quirk, James, 1971. "An Economic Model of a Professional Sports League," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1302-1319, Nov.-Dec..
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    Cited by:

    1. Rockerbie, Duane & Easton, Stephen, 2017. "Risk Diversification from Revenue Sharing in a Professional Sports League: Measuring Welfare Gains," MPRA Paper 77431, University Library of Munich, Germany.
    2. Rockerbie, Duane & Easton, Stephen, 2017. "Revenue Sharing in Professional Sports Leagues as a Hedge for Exchange Rate Risk," MPRA Paper 77428, University Library of Munich, Germany.
    3. Rockerbie, Duane, 2011. "The Invariance Proposition in Baseball: New Evidence," MPRA Paper 55020, University Library of Munich, Germany.

    More about this item

    Keywords

    revenue sharing; professional sports; free agents; labor surplus; auction;

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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